Public Bill Committee

[Sir Nicholas Winterton in the Chair]
BR 02 City of London Corporation

Nicholas Winterton: I welcome all hon. Members to the third sitting of the Bribery Bill Committee. In a way, perhaps I am pleased that I was not in the Chair on Tuesday afternoon. I understand that my co-Chair, Joan Walley, achieved a baptism of fire and the Committee sat very late. I did warn the Committee that it might sit late and my instinct was correct, but I am sure that in the short sitting this morning, we shall make sound and reasonable progress.

Clause 11

Penalties

Question proposed, That the clause stand part of the Bill.
Mr. Jonathan Djanogly (Huntingdon) (Con) rose

Nicholas Winterton: Order. The hon. Gentleman nearly missed the opportunity. I say to members of the Committee that I am liable to move very quickly and if I had put the Question, he would have missed the opportunity, but I am very reasonable and helpful at this stage of the morning.

Jonathan Djanogly: I hate to remind you, Sir Nicholas, but there was one time in the distant past when I did miss the vote, so I am grateful for your patience this morning.
We come to clause 11, which deals with penalties, and let us understand the real impact of bribery and corruption. The Joint Committee on the draft Bribery Bill records that the World Bank estimates that some $1 trillion-worth of bribes are paid each year. That translates into a 10 per cent. increase in the cost of doing business globally and a 25 per cent. increase in the cost of procurement contracts in the developing world. We face an uphill struggle to combat the global tendency towards bribery in its many forms, yet this country and this Parliament have a proud tradition of spearheading global change to combat morally corrupt practices, which is what the Bill is all about.
However, despite the apparent blanket of potential criminal sanction, prosecutions for bribery and corruption are a rare beast in the English courts system. In evidence to the Select Committee on Public Administration for the report entitled Propriety and Peerages, Christopher Sallon, QC, commented:
On average, 21 people were prosecuted in each year between 1993 and 2003 under the Prevention of Corruption Acts...By comparison on average, some 23,000 defendants were prosecuted each year for fraud between 1997 and 2001. Though these figures may not be entirely accurate, it is clear that there is a considerable difference between those prosecuted for public sector corruption and those prosecuted for private sector fraud.
If we examine prosecutions for overseas corruption, we see that the figures become even sparser. It was only last year that we saw the first conviction, and even then, that was a situation in which the company had given itself up.
On average, 21 people were prosecuted a year, but the Office for National Statistics records that, in 2009, 2.15 million businesses were registered for VAT and/or pay-as-you-earnthe most reliable way of assessing the number of businesses in the UK. One wonders, therefore, how far apart the prosecution numbers are from the incidence of bribery. That gives us some idea of the potential scope of the Bill and its penalty provisions, and of the importance we must attach to them. That businesses could be fined an unlimited amount and people could be imprisoned for a maximum of 10 years is a very serious issue, but something about the figures seems not to add up, especially when set against the Governments assessment in the partial impact assessment for the Bill that the new legislation will result in only 1.3 more convictions per annum, which we calculate will increase the current average annual prosecution rate of 21 to 22.3. That is a spectacularly unambitious target, or perhaps unrealistic, given the figures I have mentioned, so can the Minister provide the Committee with an estimate of the cost of the extra 1.3 prosecutions, bearing in mind the 12-year process that the Bill has gone through and the innumerable consultation rounds that have been undertaken?
Two other factors are disconcerting. One is the apparent lack of passion on the Governments part regarding the compliance monitoring that will occur. Thirteen years having been wasted bringing the Bill to Committee, it now seems that the Bill has become an end in itself, which is certainly not the case for the Conservative party. We see the Bill as a starting point, albeit one that we want to get right. The topsy-turvy world of the Governments legislative policy is once again exposed and is indicative of a regime that has run out of puff.
The second factor is that business is being offered limited guidance only on how to comply with the new law, and that includes penalties. We debated the point on guidance in relation to clause 9 and raised our concerns then. Frankly, those concerns continue, despite the Governments pulling from their hat a rather inadequate rabbit in the shape of the letter put before the Committee during the Tuesday afternoon sitting. In the Under-Secretarys own words, it is a letter
that gives a draft outline of the guidance that might form part of the guidance available under clause 9.[Official Report, Bribery Public Bill Committee, 16 March 2010; c. 64-5.]
That is not the sort of concrete direction that business is desperately crying out for. In reviewing the penalty structure, we seem not to have taken into account two consequences of the Bill: the exclusion of a company caught under the Bill from involvement in procurement in the EU; and the far-reaching powers of sanction under the Proceeds of Crime Act 2002.

Jeremy Wright: Before my hon. Friend moves on to those two aspects, does he agree with me that another issue on which clarification would be useful is precisely how the fine regime will be implemented? The indication is that there will be a fine without limit for companies under the provision. I am sure it would be helpful for companies to understand how such a fine would be calculated.

Jonathan Djanogly: My hon. Friend makes a very good point. I am going to discuss how those penalty provisions tie in with other penalty provisions, which I think will create a problem. My hon. Friend makes the basic point that the penalty provisions in the Bill will themselves need guidance and clear direction, and I thank him for making that important point.
Moving on to EU procurement, what is proposed in the Bill will give the UK among the strictest bribery laws in the world. Consequently, we have been told that there is a real danger that UK business could be put at a competitive disadvantage compared with international businesses whose domestic bribery laws will be less strict than our own. How do the Government intend to put pressure on other countries to follow suitnot only to strengthen their own bribery legislation but to initiate prosecutions? The EU procurement directive appears to be very rigid. Any company found to have been involved in instances of bribery must be permanently disqualified from the procurement process. Article 45 of the directive requires the mandatory exclusion of suppliers for public procurement contracts for services, supplies and works. Hon. Members will be able to see the problem with that. On the one hand, UK companies will be subject to the strictest bribery laws to be found anywhere in the world, with very strong penalties attached. On the other hand, any company caught by these laws could be prevented from applying for procurement contracts in the EU.
Companies are understandably very nervous about the huge impact of falling foul of the regulationsconcerns that are compounded by the fact that many of the Bills provisions remain unclear and are reliant on guidance that has yet to appear. Will the Under-Secretary give the Committee details of the discussions that the Government have had with EU officials to determine what effect, if any, an offence under clause 7 will have under the directive? On Second Reading, the Secretary of State noted that the Government were giving active consideration to whether a conviction for the corporate offence of failure to prevent bribery under clause 7 would require mandatory exclusion under the directive. We deserve an answer to that issue now, so that business knows where it stands.
As the Government conceded, this is an extremely complex situation and by no means a straightforward issue. However, there are obvious differences of opinion among EU member states on how some aspects of the directive are to be applied. The concern at the moment is that the Governments apparent failure to rectify the issue will seriously disadvantage British business. The International Chamber of Commerce has

Nicholas Winterton: Order. The hon. Gentleman is going just a little wide of the clause. I counsel him to bring his remarks back to the subject of penalties.

Jonathan Djanogly: The point I am making, Sir Nicholas, is that the penalties that exist under the EU directives may be additional to the penalties that exist under the Bill. The penalties in the Bill have to be looked at in the context of penalties that exist in other jurisdictions.
I move on to POCA, an issue on which I touched on Second Reading, when I asked the Secretary of State whether the Government appreciated that the sentencing guidelines conflict in some ways with other sentencing powers, particularly in the 2002 Act. Businesses say that people might not come forward because, once they have been convicted under this Act, they might be liable to prosecution and penalties under other Acts. The Secretary of State said he would look at that. Will the Under-Secretary tell us whether the Government have indeed taken the opportunity to consider that point?
We of course accept the morally defensible position that those convicted of a criminal offence who have received proceeds in a criminal way have to pay them back, but we are not convinced that the interplay between the statutes is sufficiently clearly stated. For instance, one thinks of the small companya frequent examplethat falls foul of a clause 7 offence and the requirement to have adequate procedures in place to prevent bribery. I gave the example on Tuesday of a small family-run medical equipment company supplying a foreign state for the first time and being required to pay a fine to release the machines from the customs officer. We have already explored the possible circumstance where the business may fall foul of the legislation as a consequence of inexperience or naivety.
Our concern is that the small business may not only be liable for an unlimited fine under the Bill, but required to pay back all funds received as a consequence of the facilitation payment made for the medical equipment at the border. In essence, the company would be being penalised twice. There seems no provision to say that the penalty charged in one instance shall not be duplicated under other legislation. I suspect that such dual financial demands on the company would often prove too much for it to continue. With that could go jobs and tax revenue, at a time when the country is in economic turmoil, and in a case where the fine may be appropriate but the busting of the company totally inappropriate.
Many businesses we have spoken to are worried that prosecution under the Bill will not be the end of the matter. They are concerned that further action may be taken against companies under the proceeds of crime legislation. The International Chamber of Commerce drew parallels with the situation in the USA. The original purpose of POCA was to prevent criminals enjoying the proceeds of activities, the same underlying purpose as the USAs Racketeer Influenced and Corrupt Organizations ActRICOpassed originally as an anti-mafia measure. Now RICO is often used in aggressive commercial litigation and by administrative authorities in furtherance of their policies. The ICC fears that POCA may have the same potential in the UK.
That issue came up in relation to BAE Systems. I will not go into the present court case but simply highlight the widely known fact that one of the key problems in reaching a settlement was the difficulty in finding a penalty that would not breach the Foreign Corrupt Practices Act in the USA, or stop BAE bidding for contracts under EU law. As a result, negotiations dragged on for months and a deal was only narrowly securedand now even that is being tested.
The issue is one of outcomes. Do we want more successful prosecutions? The Government, with their 1.3 additional proposed prosecutions, are presumably saying no. We say that we want more efficient prosecutions and a legal framework that business understands and can work with, and that will involve having a system that encourages self-reporting and plea bargaining. The Under-Secretary must recognise that not only do we not have such a system at the moment, but this penalty clause leaves serious questions about whether we can move towards a better plea-bargaining situation. Will the Under-Secretary give non-governmental organisations and businesses an indication of the Governments policy on the issue?

Robert Syms: Does the fine regime relate to the level of bribe, the level of the contract involved or the level of turnover of the company? Those are relevant factors. One can break a company or fine it for a relatively minor offence.

Jonathan Djanogly: My hon. Friend makes a good point but I do not know the answer. I ask the Under-Secretary to address that in her remarks.
To what extent will civil rather than criminal remedies be used? Does the Under-Secretary think that the existing legal framework supports the desired use of plea bargaining? Does she think that other laws will hold up deals being made? We are enacting serious criminal legislation that, if it is to work properly, will require a regulatory framework involving an understanding of the commercial world in which some of the decisions will be made. Do we have that understanding from the Government? I am not entirely sure.

Oliver Heald: Will the Under-Secretary say a word or two about self-cleansing? There is concern about the extent of the Serious Fraud Offices approach of persuading companies to have internal audit, to co-operate with the authorities and to confess if they discover bribery. That should be encouraged, but the interaction of the clause with public contracts regulations and the Proceeds of Crime Act 2002 might make that more difficult. Will she give a perspective on how we can encourage companies to clean up their acts if, for example, a new management discovers that there had been dubious practices? Will the effect of the clause be that, if a prosecution goes ahead, that company will not be able to tender for public contracts and will be put in a position of risk? The Joint Committee report states that Jeremy Cole of Lovells said that a company
will have no incentive to undertake internal audit and co-operate with the authorities. On the contrary, it may be encouraged to conceal the offence...corruption will be driven underground, when preventing corruption is best achieved by bringing it out into the open.

Jeremy Wright: To extend that point, the Joint Committee report also makes it clear that there is concern that self-reporting of any bribery within a company would be non-existent because of the automaticity of the penalty that my hon. Friend describes.

Oliver Heald: Exactly. We have already discussed the range of situations at the minor end of the scale on which there will be prosecutorial discretion. I wonder whether the Under-Secretary feels that, in these cases, the authorities might say, Look, you have had internal audit and you have reached the decision to self-report so, in those circumstances, we think it is right to exercise the discretion and well go for civil recovery, instead of going down the criminal route and ending up with the penalties described in the clause.

David Howarth: I apologise to the hon. Member for Huntingdon for slipping out of the room for a few minutes during his speech, but my hon. Friend the Member for Oxford, West and Abingdon has filled me in on what he said. However, the point that I want to address is one that he made when I was still present, and it was also made by the hon. Member for North-East Hertfordshire.
I do not understand the problem that the Conservatives seem to have with the Proceeds of Crime Act 2002, the point of which is to strip criminals of the gains that they have made from crime, which is a perfectly appropriate approach for such economic crimes. They are precisely the sorts of crime that the Act ought to be aimed at, instead of dealing just with the proceeds of drug dealing, for example. The fines agreed in recent cases are low compared with the size of the deals involved. For example, in the BAE case to which the hon. Member for Huntingdon referred, we were talking about a $250 million fine in the US and £30 million in the UK, which sounds a lot, but not compared with the deals. The al-Yamamah deal was worth somewhere in the region of £40 billion, and even the Tanzanian one was £25 million. Given the scale involved, it is quite appropriate for prosecutors to have proceeds of crime legislation available to them.
Another pointthis is somewhat contrary to the position of the hon. Member for North-East Hertfordshire is that I hope that we can look forward to an increase in penalties as a result of the Bill? One of the existing problems is not the maximums, but the way in which they are dealt with in the sentencing guidelines, because prosecutors find that that limits the payments that can be required from offending companies. The Secretary of State said on Second Reading that he would look at the issue, so I hope that the Under-Secretary can confirm that that is the case and that the sentencing guidelines for this new offence will be more robust than those for existing offences.

John Howell: I have two points to make. One of my fears about what might happen with this Bill relates to the way in which the Proceeds of Crime Act 2002 is being abused. As one of my constituents is finding, it is being used for fishing trips to catch people who are, at the very most, marginally involved in what might eventually be considered a serious crime. We need to make sure that the Bill does not go down that path as that would be unfair and a retrograde step. I want to ask the Under-Secretary some questions about how she thinks that this will fit in at an international level and to pick up some of the points about us not having a level playing field.
Two issues come out of the OECD commentary, the first of which is the question of corporate liability. The latest edition of the commentary says that 24 of the 36 signatories to the convention are yet to implement a mechanism on corporate liability, so we are already at a disadvantage there. However, when it comes to setting the fine, the commentary identifies three groups of countries that take completely different approaches. One group fixes the penalty well below the â‚Ź500,000 mark. Clearly the commentary and the convention do not see that as a particularly advantageous way of implementing this sort of legislation, as it says that that is inadequate to deal with corruption, particularly among multinational companies.
In the second group of countries, which includes some of our major European alliesAustria, Belgium, Finland, France, Germany and Italythere is a maximum penalty of around â‚Ź1 million. There is some doubt as to where Japan fits in, but it does not seem to have the unlimited penalty that is envisaged by this Bill. The commentary says that there are several jurisdictions in which there is an unlimited amount, but unfortunately it does not name them all, although Canada, New Zealand and Switzerland take such an approach. It therefore seems that there is a very unlevel playing field. What assessment has been done of how the UK fits into that? What plan does the Under-Secretary foresee going forward under the aegis of the OECD to bring everyone to the same level so that there is not an unlevel playing field?
I should also like to pick up the question about the proportionality of these penalties. It is clear that there needs to be strong guidance on the basis on which the penalties will be levied. If they are to be based on a percentage of turnover, there is an argument that that would be fairer, in terms of the mix of large companies and small and medium-sized enterprises, than an approach that would be disproportionate, particularly for SMEs that are trying to do business overseas and are much more vulnerable to the sort of activity that we have been discussing.

Claire Ward: It is good to have you back in the Chair, Sir Nicholas. I hope that we will have a more conducive sitting this morning.
I listened to the hon. Member for Huntingdon with interest. Businesses might want to consider carefully what he said, which was that he wanted more prosecutions. That is not the Governments policy, because if the Bill works correctly, it will act as an enormous deterrent to ensure that companies do not engage in bribery and that they have in place adequate procedures to ensure that they, or those who act on their behalf, do not do so.
I hope that we do not see a rapid increase in the number of prosecutions, but there will be circumstances in which it will be appropriate for full prosecution and a trial to take place. However, we also want to encourage companies to self-refer by contacting the prosecuting authorities and discussing circumstances in which they have found that bribery might have taken place. In those circumstances, it might be more appropriate for a company to plead guilty, because it has self-referred and wishes to clear up the problems it has found within the organisation. The authorities could deal with that more appropriately in ways other than a full prosecution, perhaps even through fines or civil recovery procedures. 
Companies will feel satisfied that the purpose of the legislation is to prevent bribery, but if it does take place, we will deal with it appropriately. The Bill is not intended simply to drag as many companies as possible through the courts, and I think that companies will be worried by what the hon. Member for Huntingdon has suggested.

Oliver Heald: As the Under-Secretary knows, I support the idea of self-cleansing and persuading companies to clean up their acts, and I want new managements to be able to do that. What is the interaction between the Bill and public contracts regulations? If a company that self-reports will subsequently be unable to get a public contract, that will be quite an obstacle. Am I right in thinking that the approach that the Serious Fraud Office has outlined of trying to encourage self-reporting would mean that, in many cases, civil recovery could take place and there would be no need for a formal conviction that would bring in the question of public contracts regulations?

Claire Ward: I shall come back to article 45 directions, but I simply say that that will, of course, depend upon the circumstances of businesses, what has happened, how they found out about it, whether they self-referred and whether they were willing to hold their hands up and say, It shouldnt have happened and we want to deal with it and co-operate with the authorities. That is a sensible way to proceed for businesses, but they will be concerned about the position that the hon. Member for Huntingdon is taking on behalf of the Conservative party.

Jonathan Djanogly: I really have to address this point because I think that the Minister cannot have heard half of what I have said in Committee. We have been talking about the need for better guidance and to encourage people to come forward, as my hon. Friend the Member for North-East Hertfordshire said. Of course, the approach is about not only this Bill, and prosecutions and penalties; we are saying that it is about much more than that. However, the Under-Secretary must appreciate that the level of prosecutions has been very low at a time when a huge amount of fraud has been reported by outside organisations and the OECD and others have been saying that we have not been cracking down on bribery as we should have been.

Claire Ward: The hon. Gentleman will, no doubt, wish to refer to the appropriate point in Hansard, where he will find that he said in his opening remarks that he wanted more prosecutions. If that is the simple outcome that he wants from the Bill, he fails to see the complexity of the issue and the wider point of how we want the Bill to prevent bribery in the first place. The most important aspect of clause 7 is the encouragement for companies to have adequate procedures.
We estimate that the number of prosecutions of commercial organisations will be 1.3 per year, but that figure refers to contested cases under clause 7. We are therefore estimating that there might be one additional contested Serious Fraud Office prosecution of a commercial organisation per year, and one additional contested Crown Prosecution Service prosecution every three years. However, our policy is designed to limit the number of prosecutions because there are other ways of dealing with the problem and the main purpose of the Bill is to stop bribery from taking place in the first instance, which is something with which I hope the hon. Gentleman will agree.
Clause 11 sets out the penalties for the offences. In the case of the two general offences and the offence of bribery of a foreign public official, the maximum penalty following conviction on indictment is 10 years imprisonment or an unlimited fine. That compares with the existing maximum prison term of seven years. The increase to 10 years reflects the seriousness with which the Government view the offences, and we make no apology for stating yet again that we see bribery as a serious offence. Through the Bill, we are setting a high threshold that we hope companies can meet to ensure that they are not engaged in bribery.
The maximum penalty for a corporate offence will be an unlimited fine. In the normal and proper way, the appropriate fine in any individual case will be determined by the sentencing court.

Jeremy Wright: Will the Under-Secretary give way?

Claire Ward: I might be about to deal with the hon. Gentlemans point, but I will give way.

Jeremy Wright: If the Under-Secretary was about to elucidate her point, I shall let her do that and intervene later, if she will allow me. As she might be anticipating, I want to explore a point raised by my hon. Friend the Member for Poole. On what basis might a fine be calculated, because I can think of at least three different bases?

Claire Ward: As our response to the report by the Joint Committee explained, when assessing the level of all fines,
including those for existing corporate offences, the courts are required by law to ensure that the amount imposed reflects the seriousness of the offence and the circumstances of the case, including the known financial circumstances of the offender.
That was the concern raised by Conservative Members.

Jeremy Wright: I understand that. However, as my hon. Friend the Member for Poole suggested, there seem to be three possible basesthe size of the company, the size of the deal, and the scale of the wrongdoingthat could lead to completely different conclusions. It might be helpful if the Government gave some indication as to which of the three they believe to be pre-eminent.
If we dealing with a large company that is carrying out a small deal, by its standards, but there is substantial wrongdoing, what level of fine should the court be considering? Alternatively, if a small company is carrying out, by its standards, a big deal and there is minimal wrongdoing, what standards should the court apply? Those are three different things.

Claire Ward: They are, but it is not for the Government to try to tie the hands of the sentencing court. The court will make a determination after considering the seriousness of the offence, the nature of the business and its assets. At a specific level, the determination is a matter for a court, not the Government. If there is a desire for guidance further to assist the courts to determine what fines are appropriate, we will consider asking the new sentencing council to draw up suitable guidelines.

John Howell: The Under-Secretary makes a powerful argument, from her point of view, but does she accept that the Government have a duty to say that the system usedwhatever it isshould be proportionate and reasonable? Surely they are the guiding principles of that system, so will she write that into the Bill?

Claire Ward: They are not something we can write into the Bill. No amendment of that nature has been tabled by the hon. Gentleman or his colleagues. However, those are issues that the court will consider when taking account of the seriousness of the offence and deciding what is reasonable.

Jonathan Djanogly: My hon. Friend the Member for Henley has just made an important point, as he did when he said that this proposal has to be put in the context of what other countries do. The Under-Secretary says that the matter should be left to our courts, but the fines imposed by American courts are huge compared with those set by this countrys judges and courts. There has to be some international balancing, so I am not sure whether she can say that the matter should be left to our courts.

Claire Ward: I think that it should be left to the courts. The Criminal Justice Act 2003 sets out the issues a court must consider when sentencing. The hon. Gentleman has referred throughout our debates to what the Americans do and the practice in other parts of the world, but I want to make it absolutely clear that we are setting a high standard with the Bribery Bill. It is a gold standard, and the Bill is recognised by the OECD as being of a higher standard. The fact that other countries do something different or less acceptableperhaps by allowing facilitation paymentsdoes not mean that we endorse them. We are setting a higher standard, and we think that the rest of the world will in due course follow the higher standards that this country is setting to ensure that we stamp out bribery and corruption.

Jonathan Djanogly: The Under-Secretary has entirely missed the point that my hon. Friends the Members for Rugby and Kenilworth and for Henley and I are making. We are saying that in jurisdictions such as the United States, the penalties are much more stringent than those in this country. The Under-Secretary has tried to turn that on its head by claiming that penalties are tougher here, but that is not the case. Other parts of the world are more stringent, and my hon. Friends and I are asking how we can leave it to the courts to make the assessment when the issue needs to be looked at internationally.

Claire Ward: Because when our courts are sentencing, they do not think, What do the Americans do? They look at guidelines, legislation and what is expected in this country. We are setting a high standard by stating that the fine can be unlimited, and its level will be appropriate to the circumstances of the case.

Jonathan Djanogly: Does not the Under-Secretary appreciate that to deal with international bribery, when the crime is unlikely to take place in this country, we have to look at the issue on an international basis?

Claire Ward: The hon. Gentleman cannot make comparisons between the American system and ours.

Jonathan Djanogly: Why not?

Claire Ward: Because the cases that go before the American courts are of a different nature from those that go before ours. They are different because the American system has a body that exempts certain types of cases from ever reaching the courts and the Americans have a different system of plea bargaining.

Jonathan Djanogly: The Under-Secretary again totally misrepresents the facts. We have only ever had two prosecutions for overseas bribery in this country; America had 40 last year.

Claire Ward: Which is the very reason whyI am sorry, Sir Nicholas, that we are straying slightly away from the clausewe are introducing the clause 6 offence. We want to make it easier to deal with cases involving the bribery of a foreign public official, instead of relying on existing legislation, which has not been as effective as we would have liked. That is the precise reason why we want the clause 6 offence. The hon. Gentleman is not really making the point that he thinks he is making.
John Howellrose

Claire Ward: I shall give way one more time before dealing with the matter.

John Howell: I thank the Under-Secretary for giving way again; she is being very generous with her time. Are there not two issues involved? Once the Bill is passed, the courts will deal with these matters under UK law according to its provisions. However, the Bill derives a lot of its impetus from the OECD and an international arrangement. I find dealing with the OECD conventions difficult, although I have had some experience of doing so. However, that international dimension needs to be taken into account when framing the Bill in the first place.

Claire Ward: It would be fair to say that in comparison with other OECD countries, we have dramatically increased the number of live criminal investigations over the past two years. As a result of dedicated police resources, we now have more than 20 live cases. Our foreign bribery investigations have resulted in two non-criminal fines, two criminal convictions and an ongoing prosecution, which puts the UK ahead of the OECD trend on legal proceedings. We already have quite a good reputation, and we are looking to enhance our reputation as a result of what we will be capable of under the Bill.
The hon. Gentleman refers to the international context. We are trying to raise the threshold of what is acceptable behaviour by companiesdomestically or abroadto prevent bribery from taking place. Our requirements will be at a higher level than those of many other OECD countries, so it would not be appropriate to make direct comparisons with them. We think that we will be the leaders as a result of the Bill, not the followers of the rest of the OECD countries.
Let me deal with other issues that hon. Members have raised. The clause provides for lower maximum penalties to apply following summary conviction in a magistrates court. In such cases, the maximum sentence for clause 1, 2 and 6 offences will be a 12-month sentence and/or a £5,000 fine, or £1,000 in Scotland. The maximum jail term will increase from six months in England and Wales once the custody-plus provisions of the Criminal Justice Act 2003 are brought into force.
The hon. Member for Huntingdon asked about the article 45 directive. We are aware that that is a serious issue and that companies are keen to know what will happen. We are working on this complex issue in relation to clause 7, and we hope to be able to reach a view on it shortly. However, I can assure hon. Members that the Governments position will be clear before any of the offences are brought into force.

Jonathan Djanogly: The Under-Secretary gives the same response that the Secretary of State gave on Second Reading. Are we to infer that there has been no change in position and no further contact since Second Reading? Given that the Bill is going through Parliament, one would have thought that that would have been a priority for the Government, so will the Under-Secretary tell us what has happened since Second Reading?

Claire Ward: The hon. Gentleman is wrong to suggest that there has been no action since Second Reading. The matter is under detailed consideration, but it involves complex issues surrounding the possibility of companies being debarred permanently as a result of the implementation of article 45 with regard to clause 7 offences. That is why we are giving the matter serious consideration, and we will come to a view on it as soon as we can.

Oliver Heald: The hon. Lady says that discussions are continuing. Are they internal discussions in government, or are they being held with the European Commission or other countries?

Claire Ward: The discussions are ongoing and take account of the views of other Government Departments. There are also different views in Europe about how article 45 is applied, so it is important that we get the decision right.
I will now deal with the financial effects of the Bill. I draw hon. Members attention to the explanatory notes, which state that the Bills provisions
would result in a net annual increase in costs for the criminal justice system of £2.18m. This is based on an estimate of a small number of additional prosecutions a year arising from the introduction of the new offence relating to commercial organisations.
I trust that I have dealt with the main issues raised during the debate.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12 ordered to stand part of the Bill.

Clause 13

Defence for certain bribery offences: legitimate purposes

David Howarth: I beg to move amendment 23, in clause 13, page 9, line 2, at beginning insert Subject to subsection (1A),.

Nicholas Winterton: With this it will be convenient to discuss the following: amendment 20, in clause 13, page 9, line 4, leave out any function of and insert functions relating to national security by.

This narrows the circumstances in which the security services can legitimately pay bribes to those in which national security is engaged.
Amendment 24, in clause 13, page 9, line 7, at end insert
(1A) But the defence shall not be available if the persons conduct was necessary only for the exercise of functions specified under
(a) section 1(3) of the Security Service Act 1989;
(b) section 1(2)(b) of the Intelligence Services Act 1994;
(c) section 3(2)(b) of the Intelligence Services Act 1994..

This rules out the defence in cases where only functions relating to safeguarding the national economic interest are engaged. The defence would still be available in cases involving national security or the prevention and detection of serious crime.
The lead amendment has been tabled by the distinguished lawyer, the hon. Member for Cambridge.

David Howarth: Thank you for the introduction, Sir Nicholas; I am not sure that I deserve it.
We started debating the clause during our consideration of clause 10, so I shall not spend a great deal of time repeating what was said then and will just set out the problem. Clause 13 creates a statutory defence for the intelligence services and the armed forces when, in the course of their functions, it is necessary for them to violate either clause 1 or clause 2in other words, to give a bribe or to receive a bribe. Interestingly, as the Under-Secretary said in our debate on clause 10, clause 13 does not exempt the intelligence services or the armed forces from clause 6, which deals with the offence of bribing a foreign official. When there is an overlap, and both a clause 1 crime and a clause 6 crime have been committed, the clause 6 rule takes precedence, so the extent of clause 13 is limited to private sector bribery by the British intelligence services or the British armed forces.
My basic stance is that the clause should not be in the Bill, which we shall discuss during the stand part debate. However, I am open to persuasion that it is possible to narrow the scope of the defence to make it more satisfactory. Three groups of amendments have been tabled to achieve that, the first of which is about the intelligence services. The defence relates to the functions of the intelligence services, but the provision dealing with them shows that they have three functions. One is in regard to national security, which would be perfectly relevant to clause 13 if it were to be kept in the Bill. The second function relates to the national economic interest, and the third is concerned with the detection of crime.
The Government will have to concede that the third elementthe detection of crimeshould not be in the Bill. In the Lords, they agreed that law enforcement agencies should not be covered by the clause so, by implication, they conceded that point. I shall be interested to hear what the Under-Secretary says about how the Bill will be made consistent, because the law enforcement functions of the intelligence services seem to be covered, but not the law enforcement functions of the police and the normal law enforcement agencies.
Amendments 23, 24 and 20 focus on the national economic interest. It is not legitimate for that function to attract the same protection as national security. The problem is not theoretical. The Committee will recall the al-Yamamah case, when the director of the Serious Fraud Office called off the investigation in controversial circumstances. When the papers came out from the court cases surrounding that issue, it became clear that the Prime Minister of the day, Mr. Blair, was originally most concerned about national economic issues, such as the economic benefit to be gained from selling more fighter aircraft to Saudi Arabia. He had to be told, in quite straightforward terms, by the then Attorney-General, Lord Goldsmith, that such considerations were not appropriate under international law, because the OECD convention on bribery rules out the use of economic considerations when deciding whether a prosecution should be brought, or their use as part of the national regime controlling corruption.
Given that exchange between the Attorney-General and Prime Minister of the time, it is clear that if the Bill allows national economic considerations to be a defence in any way, even under the limited circumstances of the clause, we will be in violation of our international obligations under the OECD convention. Apart from that, it would be wrong for such a defence to apply to the non-national security functions of the intelligence services.
The amendments attempt to deal with the issue in two ways. One approach, in amendment 20, is to say that the defence applies if national security reasons are engaged. There might be additional reasons for which the actions of the intelligence services were engaged, but they would have to include national security. The approach in amendments 23 and 24 goes one step further and is more in line with our international obligations. The amendments would effectively rule out cases in which national economic considerations were involved. This serious issue involves our international obligations, so I will be interested to hear what the Government envisage as the way forward.
Mr. Djanoglyrose

Nicholas Winterton: Mr. Djanogly, you have about one and a half minutes to speak before we adjourn.

Jonathan Djanogly: Thank you, Sir Nicholas.
Generally, we are more concerned that the question of authorisation is dealt with, rather than the amendments, which would restrict the scope of the circumstances in which the security services could pay bribes to cases involving national security or the prevention and detection of serious crime. It is hard to foresee the circumstances in which such cases would arise, but I understand how frustrating it would be if the security services did not have such powers when they were needed, even if an appropriate authorisation process was available.

Oliver Heald: In the modern world, to what extent does my hon. Friend think that economic considerations and national security considerations can be closely intertwined, such as with energy security?

Jonathan Djanogly: In practice, those considerations are clearly intertwined, which is why I had problems thinking of circumstances in which we should have particular carve-outs. Binding peoples hands in such a way would be inappropriate, and the question is whether such actions should be allowed in the first place. That is a valid argument, and it might be the motivation behind the amendments.
David Howarthindicated assent.

Jonathan Djanogly: The hon. Gentleman will be able to make his case for that during the stand part debate. However, I do not think the restriction proposed in the amendments is appropriate.

Nicholas Winterton: Order. I hope that this afternoons sitting goes well because Joan Walley will be in the Chair.

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at One oclock.